Foreign investors are losing interest in Australia's property market

The proportion of Australian residential properties bought by foreign investors continued to slide in the September quarter, dropping to the lowest levels seen since 2012.

And the decline was broad-based. Be it for houses or apartments, new or existing, the percentages all dwindled.

Perhaps it’s not just Australian first-home buyers who are struggling to enter the market?

According to the National Australia Bank’s latest Residential Property Report, a survey that captures views from those working in the property sector, foreign buyers accounted for just 10.2% and 6.4% of new and existing property purchases during the September quarter, continuing the slide seen since the middle of last year.

This chart from the NAB demonstrates the deceleration over the period.

The bank, citing survey responses, said that influence of foreign buyers continued to lessen due to tighter conditions imposed on foreign buyers that are still having an impact.

Earlier this year Australia’s major banks tightened lending to overseas investors, and in some instances stopped it completely.

Some state governments also applied a surcharge on stamp duty for properties purchased by non-residents.

Recent strength in the Australian dollar, along with continued rapid house price growth in Sydney and Melbourne, could also be contributing factors behind the slowdown.

According to data from CoreLogic, the median dwelling price in Sydney has jumped by 95.7% since January 2009, while those in Melbourne have increased by 81.8%.

In terms of new property purchases, the NAB said that foreign investors were less prominent in Australia’s most populous states.

“In Victoria, their market share fell to 15% in Q3. This followed a sharp jump in foreign buying activity in Q2 to 21.7% of sales ahead of an increase in the stamp duty surcharge on foreign buyers of Victorian property,” it said.

“Foreign buyers were also less influential in New South Wales, where they accounted for just 8% of total demand ? the lowest level since Q1 2012.”

Here’s that in visual form, not only for New South Wales and Victoria, but also for Queensland and Western Australia.

And that was mirrored for existing property purchases, according to the NAB.

In Victoria, foreign buyers accounted for just 8.5% of all established property sales. In New South Wales, their share fell to 7.2%.

Foreign buyers were also less prominent in Queensland and Western Australia.

In terms of the mix of properties purchased, foreigners continued to favour apartments over houses in all states surveyed apart from Victoria where the split between the two was almost identical.

“There was a modest change in the type of property purchased by foreigners Australia-wide in Q3,” said the NAB.

“Overall, 52% were apartments (53% in Q2) and 17% land for re-development (18% in Q2).

“The share of houses increased to 32% (29% in Q2).”

The NAB said that around 240 panellists participated in the survey, consisting of a mix between real estate agents/managers, property developers, asset/fund managers and owners/investors.

According to Australia’s Foreign Investment Review Board (FIRB), approvals for foreign housing investment reached a record $61 billion in the 2014-15 financial year.

That was up 75% on the previous year, which itself was up 102% on the year before.

Updated figures for the 2015-16 financial year will be released by the FIRB early in 2017.

Nov 4, 2016 / Business Insider Australia

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